Wall Street Thinks Archer Aviation Stock Is a Buy. Here's Why I Don't

Archer Aviation(NYSE: ACHR) is a frontrunner in the nascent eVTOL (electric vertical takeoff and landing) space, which could expand into a multi-trillion-dollar opportunity, per analysts at Morgan Stanley(NYSE: MS).

Wall Street is overwhelmingly bullish on the eVTOL stock , with some analysts, like Amit Dayal, insisting on double-digit price targets (Dayal's is $18), implying major upside from today's share price of $4.25. Cathie Wood, of Ark Invest, has also been actively buying Archer shares, most recently purchasing a stake worth about $4.5 million.

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I, too, am an investor in Archer, and I expect the stock to grow substantially over the next decade. However, that doesn't mean I would unilaterally recommend this stock to everyone. While I'm pretty optimistic about Archer's long-term prospects, there are some major reasons to avoid it right now -- emphasis on now . Here's just one.

Archer's biggest opportunity could take decades to realize

For starters, Archer is building an air taxi business, one in which eVTOL aircraft will shuttle travelers around helipads in major cities. It might also sell these eVTOLs to aviation companies. Alongside this, Archer is building a separate defense business , with plans to sell military drones, surveillance systems, and other technologies.

The two businesses could constitute a one-two punch that transforms Archer into a major player in both aerospace and defense, possibly generating billions in annual revenue. There is, however, a lingering question of how long it will take Archer to get there.

Consider that Morgan Stanley report, which was published in 2021. While analysts at the investment bank foresee a multi-trillion-dollar opportunity for urban air mobility (UAM), with eVTOLs playing a major role, the bank also warned investors that widespread adoption of the technology might not come until 2040. As such, the bank warned: "Temper your excitement with patience."

Don't miss that. Morgan Stanley, which was generally bullish in that report, acknowledges that the industry could succeed even if adoption is slow.

That brings us back to Archer. Bullish targets are bullish targets -- products of speculation and fiction, not exactly factual or even rational -- and an $18 price target on an aviation company whose biggest opportunity lies in a murky area of regulation, commercialization, and manufacturing, strikes me as overly optimistic. Worse, it could distort investors' expectations, making a highly speculative stock seem like a clear path to enormous returns.